David Passiak helps executives apply Silicon Valley startup thinking. He is the author of several books, including Disruption Revolution: Innovation, Entrepreneurship, and the New Rules of Leadership and Empower: How to Co-Create the Future. A former religion scholar and Ph.D. student at Princeton who spent 10 years in New York City leading social media strategy for global brands, today he lives out of one suitcase, visiting 15–20 countries per year giving talks and workshops on how to build powerful communities and movements around brands and startups. He recently spoke to The Innovator about creating an innovation culture and the importance of being a purpose driven company.
Q: How can companies create the right culture?
A lot of people think about companies as just selling products and services and that comes at the expense of very basic idea: products and services are sold to help others. Any organization’s entire purpose is to provide services that solve problems, whether it a startup or massive global company. The make money by providing something that someone else needs. Take any organization and their purpose, their value to shareholders is a function of a positive impact on the world or on their audience. The profits follow from that.
Q: What does being a purpose driven company have to do with innovation?
DP: Purpose is defined in relationship to the audience or customers that you serve. When you start with that idea as a basic premise a lot of things happen, including your focus from a strategy perspective. You ask questions about how to best serve what marketers call a persona type. For example, ‘WWhat do they need?’ Can you quantify the value of the pain point you are trying to solve? If it is a $100k problem, then a $50k solution actually saves them money. You can build an innovation strategy around that.
When the world is constantly changing, your purpose is the core values and mission that will not change. That is a company’s North Star. Why do your employees want to work for you? Why should they care enough to be loyal to you? Why should they take risks to help innovate, or why should they share their best ideas instead of going off on their own?
Having a mission or purpose driven organization makes it internally more open to sharing and collaboration which are essential to accelerating innovation. This creates a work environment where failure or making a mistake is an opportunity to learn. Learning accelerates development of new products and services. , People collaborate effectively because they have support and care for each other. They enjoy coming to work and feel part of something greater than themselves.
(Organizational psychologist) Adam Grant talks about how every organization has givers and takers. A taker within an organization has a 3X negative impact because he or she are only looking out for himself or herself and create a toxic work environment. Purpose driven organizations attract givers. A holistic picture starts emerging. If you are doing well by doing good, pursuing a mission to serve the needs of others, then you create a better work environment, which translates to more loyal employees, more loyal customers and reduced customer retention costs.
Q: What about middle management’s resistance to change?
DP: The idea is not to get everyone involved. People in middle management have incentives not to embrace innovation. They have targets to hit and they will resist anything that distracts them from their targets and potentially undermines their performance. You really need the support from the top in order to encourage the type of changes and vision I talked about. At the same time you need to have bottom up approaches that allow people at all levels in the organization to share ideas and participate.
Often this becomes self-selective. For example, you could have company-wide crowd-sourced innovation projects. Think of ways you can create feedback loops because people at the lower level of a company are often younger and closer to the customers and bleeding edge. The most engaged and ambitious employees will emerge. Find a way for them to submit leads and feel like their voices are heard. Try to encourage people to think about the company in the way you would build a movement. You need some kind of vision from the top down and something at the bottom to excite people and actually enjoy coming to work everyday.
Q: What is the best way to incentivize people to embrace innovation?
DP: You could offer people a free lunch if they come to brain storming sessions. There are other ways to get a certain percentage of people excited to share ideas. Other people won’t participate and that is OK. If you have 10,000 people in your company you don’t want to get 10,000 ideas. You could also create cross-functional teams across departments to facilitate communications. Incentives are not necessarily financial but it could be that if a product or service comes out of a collaborative innovation effort that people involved are compensated.
The most critical component for executives is that once the leadership makes a commitment it needs to prepare to make changes that their employees are requesting. Leaders say they want to change but when radical changes are proposed leaders often don’t want to implement them. When they fail to implement the most valued and most innovative employees at that point leave. Then you are left with people who want a ‘job,’ instead of a career, resulting in stagnation that kills companies.
There is this classic story about a room full of executives who are asked “Who wants to change?” and everyone raises their hand. Next they are asked “Who is ready to change?” and no one holds up his or her hand.
Q: What needs to change in the relationship with customers?
DP: Feedback is necessary from both employees and customers. Larger companies tend to ship finished products and tell customers what they are doing instead of asking for their feedback. Alongside of the other types of shifts, this whole mindset of being more customer-centric is important. Companies need to be constantly asking their customers questions. You don’t sell a product or a service you help to identity problems and sell a solution.
Q: What can companies learn from Silicon Valley startups about building communities?
DP: Douglas Atkin who is the former Global Head of Community for Airbnb has this idea of a commitment curve. The lowest level of commitment is getting customers to sign up for an email newsletter or become a fan on Facebook. Next you might ask them to participate in a webinar. The idea is to move people up a curve to greater levels of commitment. Airbnb uses this strategy. When it anticipates legal trouble in a city, they know it will take three months for local hosts to come to city hall to start testifying about why they should be allowed to be hosts. Every company wants “super fans” that are highly engaged advocates for the brand, but it takes time to nurture and develop these relationships. Instead of thinking about vanity metrics like page views, email sign-ups, or fans, focus on strategically building different levels of commitment, different levels of willingness to help a company.
Q: What is your advice to people at the top who want to drive the digital transformation of their companies?
DP: Innovation is about implementing processes that force people to communicate and behave differently and that requires a certain amount of restructuring. The challenge is doing strategy and operations at the same time. These two things require different modes of behaving and it is very hard to switch back and forth. When you make a decision to drive transformation you have to divide your time effectively be able to do that. Innovation is challenging because you still have the day job of running the company.
There is a great quote in my most recent book Empower from Rita Gunther McGrath who is considered one of the top business strategists: “You can’t shrink your way to greatness.“ I think it is important for companies to communicate to shareholders they need to make investments to keep up with technology developments. The average company in the S & P 100 is there less than 10 years which means larger companies have a shorter lifespan than a dog. Think about that for a second. It ultimately comes back what type of organization do you want to have?
Facebook is a good example. They made some decisions early on that impacted stock price but showed they would be there for the long haul. Their attitude was we have strategy for growth that is in best interest of the community. They stuck to that vision and are one of the most successful companies in the world. Airbnb’s motto is we want people to belong anywhere. It sounds like a goal that is not possible because it is so ambitious but it sets a metric that they are aiming for.
And big companies should take note: Around 60% of millennials want to buy things and work for companies that have a positive impact . You can see the fundamental shifts that are happening. A lot of this is being driven by technology. People are sharing and collaborating on social media and this is changing how they are sharing and collaborating in the real world.
